The objective of the three essays of this doctoral dissertation is to investigate the strategic
choices of organizational forms by competing firms in various environments.
The first essay, which is a joint work with Professor Guofu Tan, provides an alternative
theory of divestitures that relies on product-line complementarities and product market
competition. We consider a simple environment in which there axe two firms, each supplying
a group of complementary products and the products across groups axe imperfect
substitutes. We model the firms' choices of divesting and pricing as a two-stage game.
The duopohsts simultaneously choose their divestiture strategies in the first stage of the
game and the independent divisions compete by setting prices in the second. It is shown
that, when competing with each other, firms with complementary product-lines have incentives
to split into multiple independent divisions supplying complementary products
and services. Such divestitures increase prices and the parent firms' values but reduce
aggregate social welfare. Moreover, the degree of divestiture, as we illustrate in the linear
demand case, depends on the severity of competition and the nature of product-lines.
Then, intensified competition due to deregulation, trade liberalization and entry may trigger
divestitures. We further show that if two firms axe able to coordinate their divestiture
strategies, they can achieve the joint monopoly prices and profits in a non-cooperative
price game.
The second essay analyzes the strategic incentive of oligopolists to create autonomous
rival divisions when products are differentiated. We consider a two stage game where firms
choose the number of autonomous divisions in the first stage and all the divisions engage
in Cournot competition in the second. It is shown that product differentiation ensures the
existence of an interior subgame perfect Nash equiubrium, and the equilibrium number
of divisions increases with the degree of substitution among products and the number
of firms. Further, if divisions are allowed to further divide, they always will, which
leads to total rent dissipation. Thus, parent firms have incentives to unilaterally restrict
their divisions from further dividing. In the free entry equihbrium, it is found that the
possibility of setting up autonomous divisions is a natural barrier to entry. Incumbents
may persistently earn abnormally high profits. In the cases where product differentiation
is difficult, the only pure strategy free entry equilibrium is the monopoly outcome even if
the entry cost is relatively low.
The third essay develops a game theoretic model to analyze strategic leasing behaviors
of landowners in a nonexclusively owned common oil pool. The oil field development is
modeled as two more-or-less independent one-stage noncooperative game. The landowners
choose leasing strategies in the first stage, and independent lease operators choose
extraction strategies in the second. It is found that, in a nonexclusively owned oil field, it
is individually rational for a landowner to unilaterally subdivide his landholding and delegate
production rights to multiple independent firms, even though more dispersed production
control leads to heavier common pool losses. Moreover, the degree of landownership
concentration determines the degree of production concentration. The more fragmented
the land ownership, the lower is the degree of production concentration i n equilibrium.
The analysis offers an explanation for the puzzling landowners' leasing behaviors in U . S .
onshore oil fields. / Arts, Faculty of / Vancouver School of Economics / Graduate
| Identifer | oai:union.ndltd.org:UBC/oai:circle.library.ubc.ca:2429/10143 |
| Date | 11 1900 |
| Creators | Yuan, Lasheng |
| Source Sets | University of British Columbia |
| Language | English |
| Detected Language | English |
| Type | Text, Thesis/Dissertation |
| Format | 4712762 bytes, application/pdf |
| Rights | For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use. |
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